What is Good and Services Tax (GST) in India

In India, the central government introduced the Good and Services Tax (GST) in 2017, to incorporate a few taxes in one blanket. Goods and Services Tax is an indirect tax used in India on the supply of goods and services.

Some of the taxes replaced by GST are:

• Sales tax

• Service tax

• Octroi

• Central Excise duty

• Entertainment tax

• Purchase tax

GST is a multi-stage location-based tax, which is charged on each stage of the supply chain from the purchase of raw material, till the sale of finished product and then to the end consumer. Typically, wherever there are value addition and transfer of ownership in the supply, GST will be applicable.

GST is collected by the government of the destination, where the final purchase takes place. GST has three components:

1. Central Goods and Services Tax (CGST), where the central government collects the charge on the supply of good and services within the state.

2. State Goods and Services Tax (SGST), or UTGST for Union Territories, where the state government/Union Territory collects taxes on the supply of goods and services within the state.

3. Integrated Goods and Services Tax (IGST), where the central government collects taxes for the sale of goods and services beyond state borders.